Netflix Cut Its Ad Revenue Forecast by $300 Million. Does That Matter More Than Its Earnings Beat?
Key PointsNetflix edged past bottom-line estimates in the third quarter, but the stock still fell 6% after hours.
Netflix reported a slight beat on its earnings per share, but its overall revenue growth and engagement issues have raised concerns among investors. The company cut its ad revenue forecast for the year from $3 billion to $2.7 billion, indicating weakness in what is supposed to be a key growth market for Netflix. While the decision to enter the advertising market has been successful, the slow rollout of ad product capabilities has led to a shortfall.
Despite this, advertising still makes up less than 6% of Netflix's revenue, and the streamer expects to bring in $51.1 billion in revenue this year. However, the disappointing engagement trends and the need for Netflix to prove it can stop its growth slowdown and improve engagement have pushed the stock lower and added to investor skepticism.
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